The following is a discussion of Halachic topics related to the Parsha of the week.For final rulings, consult your Rav.

COMPETITION FOR CLIENTS

QUESTION: How does the Halachah view an insurance or travel agent who tries
to wrest away an established client from another Jewish agent? Is it proper
for a Judaica store owner, a wig stylist or a kosher caterer to recruit the
established clients of his Jewish competitor?

DISCUSSION: : Many poskim maintain that it is prohibited to actively pursue a
client or a customer, Jewish or non-Jewish, if the client has developed an
ongoing business relationship with a competitor. The classic case quoted in
Rama(1) is that of a medieval tailor who for many years had an exclusive
account with a local non-Jew. When another Jewish tailor actively sought the
non-Jew's business, the dispute between the two tailors was brought before
the Rashba. The Rashba ruled that the second tailor was acting improperly
and that the account should remain the exclusive right of the first tailor.

The Rashba explains that his ruling is based on the following halachic
concept: The long-term business relationship and apparent commitment between
the tailor and his client gives the tailor a certain sense of semichus
da'as, a well-founded assumption and expectation that this particular
account is his. Even though there was no explicit verbal or contractual
agreement between them regarding future business, still it was clearly
understood that he will continue to be the tailor for this non-Jew. No other
Jew is allowed, therefore, to infringe on that existing relationship and
understanding, and one who does so is acting improperly and should be
censured(2).

Nevertheless, rules the Rashba, if by the time bais din was notified, the
second tailor had already succeeded in wresting the account away from the
first tailor, bais din is powerless to force him to relinquish it, since in
a very literal sense, the second tailor did not actually take something
which is not his. Technically speaking, the account was not sealed and
delivered and, therefore, it was open to bidding from competition. [This is
especially true when dealing with a non-Jewish customer, since more often
than not, non-Jews do not have a sense of loyalty towards their Jewish
tradesmen and will readily drop one business relationship in favor of
another(3).]

Indeed, the Rama quotes opinions who disagree with the Rashba altogether
and permit - or at the very least, do not object to - the second tailor's
actively pursuing any account that he can, regardless of any long-term
relationship his competitor may have had with an existing account(4).

In the years since the Rashba's ruling, various customs evolved in European
communities in regard to this issue. Some communities strictly forbade their
members from pursuing each other's steady business accounts, going so far as
to invalidate such contracts and returning the accounts to the original
vendor or tradesman(5). Other communities prohibited such dealings but did
not invalidate them if they already transpired, while yet others allowed
such competition and did not restrict it in any way(6).

Although today a clear-cut custom does not exist, the opinion of the
majority of the poksim(7) is to follow the middle-of-the-road ruling of the
Rashba, which is to prohibit and discourage this type of competition
whenever possible(8), but not to invalidate a business deal once it has been
transacted.

Based on the above, the answer to our original question concerning the
insurance or travel agent, Judaica store owner, wig stylist and caterer
should be very clear: If a Jewish vendor or tradesman has a long-term(9)
steady customer with whom he assumes and expects to continue doing business,
another Jew is not allowed to lure that customer away. If, however, the
competitor was ignorant of - or disregarded - this rule and was successful
in collaring the account, he cannot be forced to give it up, nor is one
allowed to refer to him as a rasha, a wicked person.

There are, however, two very important considerations which may drastically
affect the halachah in several of the cases mentioned above.

It is obvious that one is restricted from soliciting another person's
steady business only if all other competitors will also restrict themselves
from soliciting established accounts. If, however, the particular business
field is full of non-Jewish or non-observant salesmen who will not restrict
their customer-baiting activities, then the restriction is lifted(10).

The insurance field, for instance, is filled with agents who are constantly
attempting to lure established accounts from other agents or agencies. This
is a legal procedure and considered normal business practice. There is no
restriction, therefore, on an observant Jewish agent soliciting business
from another agent's established accounts, since, as explained, even if he
will not solicit the account, others surely will. There is no requirement
for the observant agent to place himself at a disadvantage.

The halachah is different, however, in regard to Judaica store owners, wig
stylists or kosher caterers. These types of businesses are generally run by
observant Jews who follow the dictates of the halachah. Consequently, when a
particular vendor regularly assumes and expects that a steady long-term
account will remain his for the foreseeable future, one may not pursue that
account.

In the final analysis, therefore, there is no blanket answer. The halachah
will depend on the type of business and on the general business climate in
that particular field. If - as is the case in many service-type of
businesses - customers are generally not pursued by others in the field and
are usually loyal to their service provider, then the observant businessman
may not chase after their business. On the other hand, a type of business
where competition is the norm (e.g., commission-based businesses), is
unrestricted to the observant businessman.

Another important point to remember is that the restriction applies only to
a competitor soliciting or enticing a client to buy his product over his
competition's. It is permitted, however, for the client or customer to
solicit a different provider or agent, even though he has been doing steady
business with a particular concern business for a long period of time(11).

NOTE: As in all matters of halachah, one should consult a rav before
deciding how to approach a questionable situation. Especially in regard to
business related issues, where it is almost impossible for one to be
completely objective as it is his livelihood which is at stake, the halachic
perspective of a competent authority is imperative.

FOOTNOTES:

1 C.M. 156:5, based on Teshuvos Rashba 6:259

2 Rashba offers two Talmudical sources for this ruling: a) Bava Basra 21a,
concerning fish which were almost netted by a fisherman and then swept away
at the last moment by a competing fisherman; b) Gitin 30a, concerning the
laws of Makirei kehunah, which give a kohen the right to claim his steady
stipend from the yisrael because of the assumption that they are his, based
on their long-term relationship.

3 Indeed, some poskim are of the opinion that the Rashba's ruling applied
only to competitors pursuing a non-Jew's business, as in the case of the two
tailors. If the tailors were competing for a Jewish customer, the first
tailor would have an even stronger case, since Jewish customers have a
greater degree of loyalty and commitment to their service providers,
tradesmen, etc., and the first tailor would have had a firmer assumption
that the account would remain his; Chasam Sofer C.M. 79; Beis Efrayim 29;
M'harsham 1:151. See Seridei Eish 3:66 for a different approach

4 The logic behind this view may be explained in one of two ways: a)
Semichus da'as, assumptions and expectations, are not legally nor
halachicaly binding (Beiur ha-Gra C.M. 156:5; Aruch ha-Shulchan C.M. 156:);
b) In a fiercely competitive business world, there are no assumptions and
expectations since the threat of competition is always present (Teshuvos
Mahrshal 36).

8 Even if the competitor is offering the potential client a lower price,
still he may not pursue a client who "belongs" to his competitor; Teshuvos
Lechem Rav 216. See also Teshuvos Beis Shelomo Y.D. 19.

9 The exact length of the relationship is not clearly defined, although some
poskim suggest three years (or three deals) as a rule of thumb, see Chavos
Yair 42.

10 See Teshuvos Kol Aryeh 135 and Yeshuos Malko C.M. 19 for an explanation
of this issue.